Foreign Investment

The creation of, or investing in, an establishment in Qatar is primarily governed by the Foreign Investment Law No (13) of 2000 (the Foreign Investment Law), along with the Decision of the Minister of Finance, Economy and Commerce (now the Minister of Economy and Commerce) No (36) for the year 2001, issuing Executive Regulations to the Foreign Investment Law (the Executive Regulations). The Foreign Investment Law allows for 100 percent ownership by foreign investors in the areas of agriculture, industry, health, education and tourism, and projects involving the development and exploitation of natural resources. Foreign companies interested in obtaining commercial registration under this provision need to make an application to the Commercial Affairs Department of the Ministry of Economy and Commerce for a Ministerial Resolution from the Minister of Economy and Commerce. Article 12 of the Foreign Investment Law provides that it shall not apply to companies and individualswhom the State entrusts with excavation, utilisation, or management of natural wealth resources under a concession or agreement; or companies that are established by the government or in which the government participates (so-called, Article (68) (of the Commercial Companies Law No (5) of 2002) companies). Special rules apply in these circumstances.

The general rule, however, is that foreign investment is limited at 49 percent, with the Qatari/100% Qatari company partner(s) holding at least 51% of the share capital.

Judicial decisions in commercial disputes are primarily based on the contractual agreements themselves, provided these agreements are not in conflict with applicable Qatari laws. The general principle enunciated in Articles (2), (48) and (49) of the Qatar Civil and Commercial Law No (16) of 1971 (the Code) is that the contract is the law of the contracting parties and shall be performed in accordance with its contents and in a manner consistent with the dictates of good faith. This is, however, subject to any mandatory provisions of Qatar law and (Article (31) of the Code) to considerations of public order and morals, all of which will be applicable despite any choice of another law as the governing law of the contract. It is, therefore, advisable for foreign companies to consult a local lawyer before concluding any commercial agreement with a local entity.

Doing Business in Qatar

In order to establish a local office, foreign and local companies are required to obtain a Commercial Registration from the Ministry of Economy and Commerce. Any enquiries regarding the registration process should be directed to the Director of Commercial Affairs at the Ministry. Various other licences and consents would also be necessary.

Joint venture (known as a limited liability company (an LLC)): The general rule under the Foreign Investment Law is that foreign companies may enter into joint ventures with Qatari partners provided the foreign equity does not exceed 49% of the total capital (or 50% if the foreign entity is 100% GCC-owned). Such LLCs are not permitted to invest in the areas of banking, insurance, commercial agencies and purchase of real estate. Currently the minimum share capital must be enough for the company to realise it objectives and in any event no less than QAR 200,000.

Such a company (whether joint venture or 100% foreign owned) is taxable under the Qatar Income Tax Law No (11) of 1993 (the Tax Law). However, any Qatari or other wholly GCC national owned share in the net profits is outside the application of the Tax Law. The tax is first computed on the whole of the profits of the company at banded rates of up to a maximum of 35%, and then a deduction made for the Qatari or other GCC share.

Representative office: In 2003, the Minister of Economy and Commerce announced that under the Executive Regulations foreign companies may open representative offices without a local partner. Such offices are really ‘shop windows’ to source business – they can promote a foreign company in Qatar and try to introduce it to Qatari companies/projects. However, the representative office may not contract to do business in Qatar: this has to be done by either a foreign entity (in relation to contracts which could be performed substantially outside Qatar), or otherwise by one of the other entities permitted under the Foreign Investment Law. As such offices are not carrying out commercial activities, as such, in Qatar they are therefore not subject to taxation.

Temporary (‘Branch’) Registration: The Foreign Investment Law contains provisions which, subject to an exemption from the Minister Economy and Commerce, allow a branch of a foreign company to be registered in Qatar if that foreign company has a contract in Qatar which results in facilitating the rendering of a service or implies public benefit.

Such a branch will only be entitled to perform the specific contract in respect of which it has been registered and the registration would usually lapse on the completion of that contract.

The Qatar registered branch will be fully taxable under the Tax Law (except to the extent of any Qatari or other GCC interest therein) unless a special tax exemption is granted or otherwise applicable.

Unlike the previous law, the current Foreign Investment Law makes no express mention of the requirement for the foreign company to appoint a Services Agent who/which must be a Qatari individual or 100% Qatari-owned entity. It should be noted, however, that this position is different in the area of engineering.

Agency / Disribution / Franchise

As with its predecessor, the (relatively) new Commercial Agency Law No (8) of 2002 (the Agencies Law) defines a commercial agent broadly as a person who has sole permission to distribute or sell goods and products or to provide services within the scope of agency on behalf of its principal for profit or commission. The width of this definition is such that the Qatar Civil & Commercial Court (the Court)’s application of the Agencies Law cannot be predicted with any certainty. Further, decisions of the Court are not published and there is, in any event, no doctrine of binding precedent in Qatar. Bearing this in mind, given a quite recent Appeal Court decision which dealt with distributorship arrangements, it would however be expected (though could not, of course, be guaranteed) that the Court would draw a distinction between a “franchisee” or a “distributorship” on the one hand and a “commercial agent” on the other. The importance being that a “commercial agency” which is registered on the Commercial Agents’ Register at the Ministry of Economy and Commerce is afforded the protection of the Agencies Law. Both the Foreign Investment Law and the Agencies Law provide that a commercial agent must be a Qatari national or a 100% Qatari-owned company.

The Agencies Law effectively requires that a commercial agency in Qatar must be exclusive. However, it does provide that traders registered in the Importers Register may import commodities, which the agency includes, even if these products have local agents. Further, it provides that an appointed local agent is entitled to receive commission of up to 5% (decided by Ministerial Decision) of the commodities or products which are imported by others for the purpose of trade (ie not personal use or re-export) and which does not originate from the principal. In relation to exclusivity, while Qatar as a sales territory is indivisible, a principal may appoint different agents for different product lines.

The Agencies Law also deals with early termination and non-renewal of limited duration agreements and termination of unlimited duration agency agreements.

Services Agent:

This type of agency consists of appointing a Qatari entity to act as a service agent for a foreign company, and should not be confused with commercial agency as discussed above. It is likely that the foreign company (and, perhaps, the Qatari party) would not wish this type of agreement to be considered a commercial agency and registered as such (and therefore afforded the protection of the Agencies Law). Although the service agency used to be a common business practice in the region, it is no longer required in order to do business in Qatar. Foreign companies should, therefore, determine if appointing a service agent is beneficial in their specific circumstances.

If a foreign company chooses to have a service agent, it may be advisable to appoint such an agent on a project-by-project basis, since the local agent may be very well connected in some sectors or tenders, but not in others.

Local Legal representation

The information provided here is not intended to provide substantive legal advice in these areas. If intending to do business in Qatar or when negotiating a contract, foreign companies should engage a local lawyer to advise them on the relevant Qatari law considerations.

Distribution and Sales Channels

Most Qatari trading entities represent a variety of foreign firms in the local market. To maximize their market penetration, German firms planning to appoint a Qatari agent should ensure that the latter does not represent any competitor. Numerous food importers are also wholesalers, distributors and retailers. A handful of large local companies still dominate the market.

Franchising and Direct Marketing

This is another promising sales channel for German goods and services in the Qatari market. Qatari entities have a strong interest in investing in franchises, due to the ease of readymade business plans. However, most major fast food franchises are already established in the market.

Selling Factors and Techniques

German suppliers should stress the competitive price, high quality, and, if applicable, the new-to-market status of their products. Initial face-to-face contact with importers will significantly increase a company's business prospects. Qatari companies distributing foreign products usually request marketing and advertising assistance from the principals to introduce a new product to the market or to improve sales of existing products. Regional food shows are very useful mechanisms for locating and establishing business relations with local distributors.

Product Pricing

There is a large variety of local and foreign products in the Qatari market. Local consumers are very price conscious and actively seek out sales and promotions. Local distributors of international products often engage in promotions in order to attract consumers and gain market share. German firms should work closely with their local distributor in order to determine appropriate pricing strategies. The average importer markup on food products is about 10-15 percent. Retail food prices are generally 25-30 percent above import prices.

Advertising and Trade Promotion

Many advertising practices in the local market will be familiar to German firms. The most common forms of advertising are media announcements, billboards, and flyers. Local distributors generally develop advertising strategies in coordination with their principals. Several private advertising firms are equipped to handle promotional activities, which require prior approval of the Ministry of Municipal Affairs and Agriculture.

Media

Most newspapers in Qatar, including three Arabic and two English dailies, have a large readership. These include the following:

Arabic

"Al-Sharq": P.O. Box 3488, Doha, State of Qatar, Phone: (974) 466-1354, Fax: (974) 466-2462, E-mail: alsharq1@al-sharq.com, Website: http://www.al-sharq.com
"Al-Watan": P.O. Box 22345, Doha, State of Qatar, Phone: (974) 466-0810, Fax: (974) 466-4206, E-mail: alwatan@qatar.net.qa, Website: http://www.al-watan.com
"Al-Rayah": P.O. Box 533, Doha, State of Qatar, Phone: (974) 446-6618, Fax: (974) 432-0080, E-mail: edit@raya.com, Website: http://www.raya.com

English

"Gulf Times": P.O. Box 2888, Doha, State of Qatar, Phone: (974) 446-6621, Fax: (974) 435-0474, E-mail: editor@gulf-times.com, Website: http://www.gulf-times.com
"The Peninsula": P.O. Box 3488, Doha, State of Qatar, Phone: (974) 466-3945, Fax: (974) 466-3965, E-mail: penqatar@qatar.net.qa, Website: http://www.thepeninsulaqatar.com

The state-owned Qatar Radio and Television Corporation operates Qatar Television (QTV) and the radio station Qatar Broadcasting Service (QBS). QTV, comprising Arabic and English channels, broadcasts pre-recorded commercials. QBS also carries advertisements. The locally operated pan-Arab satellite channel Al-Jazeera receives some public funding but is independently owned and operated. It also broadcasts advertising for local and regional companies and products. There are no private radio stations.

Qatar Broadcasting Service (QBS), P.O. Box 1414, Doha, State of Qatar, Phone: (974) 849-4222, Fax: (974) 482-2888. Qatar Television, P.O. Box 1944, Doha, State of Qatar, Phone: (974) 486-4575, Fax: (974) 486-4511. Al-Jazeera Satellite TV Station, P.O. Box 23123, Doha, Phone: (974) 488-5666 or 489-4801, Fax: (974) 488-5333.

Sales Service and Customer Support

In general, after sales service and customer support is the responsibility of the local distributor. As a Qatari entity must obtain a licence for all imports, local firms generally maintain a supply of spare parts for distributed products. Local distributors may also establish workshops for after sales support, as appropriate. Foreign principals often provide regional and international training for technical support staff.

Government Procurement Practices

In Qatar, the Government is the main end-user of a wide range of products and services. All government procurement contracts are subject to the provisions of bidding and tender regulations included in Law No. (8) of 1979. The Central Tenders Committee (CTC) of the Ministry of Finance is responsible for processing the majority of public sector tenders. The CTC applies standard tendering procedures and adheres to established performance norms. It also sets the standards for rules and regulations for bidding procedures. Information on CTC tenders may be obtained from the CTC office in Doha or on the internet at http://www.ctc.gov.qa In tenders valued in excess of QR 100 million (USD 27 million), the CTC may invite and pre-qualify international firms to bid for a specific product or service. Technical bids submitted to the CTC are referred to the appropriate government end-user for short-listing. The CTC then opens the commercial bids and recommends the lowest priced technically qualified bidder to the entity concerned, who will make the final award decision. Enquiries about specific award decisions should be directed to the CTC.

Some governmental entities have internal tender committees. The Ministry of Energy and Industry and Qatar Petroleum process all tenders independently. Qatar Armed Forces and the Ministry of Interior are responsible for issuing tenders for classified materials and services. The Ministry of Municipal Affairs and Agriculture may tender consultant contracts valued at less than QR 3 million (USD 822,000) and works contracts valued at less than QR 1 million (US $ 274,000). Bid and performance bonds are required in the form of unconditional guarantees with a local bank. The standard bid bond is 5 percent and performance bond 10 percent of the contract. However, the above rate can be larger for certain projects. Foreign firms are not normally required to have a local agent for the bid process. However, by the time a contract is ready to be signed, participating foreign firms may need to have satisfied local agent requirements. The State Purchase Office (SPO), a division of the CTC, handles all local purchase orders (LPO’s) for equipment and supplies required by various government ministries. The SPO handles bids worth hundreds of millions of dollars every year. The period for preparation of quotations is usually 30 days, but very often less than three weeks after the announcement of tenders.

Government contracts normally include arbitration clauses. Unless stated otherwise in the contract, the standard clauses stipulate that disputes emanating from government contracts will be subject to arbitration in Qatar. German firms may consider seeking, whenever possible, to reserve the right to appeal local arbitration decisions abroad. Foreign and local contractors are usually paid 20 percent of the contract awarded to them against unconditional bank guarantees. Further payments are made according to a standard payment schedule based on the progress of the project. It should be noted that the payment schedule almost always authorizes the Government to retain portions of payments due until after the completion and acceptance of the project. Foreign and local contractors may experience delayed payments, which do not accrue interest, usually due to bureaucratic red tape. Arabic is the official language in Qatar though English is widely used. Bids should be in Arabic unless the tender document specifically indicates that English is required or accepted. Specifications generally conform with British/European standards.

Income Tax

Personal income tax is nonexistent in Qatar. Corporate income taxes are imposed only on international firms, based on Law No. (11) of 1993 and applicable to profits exceeding QR 100,000 (US $ 27,472). The Law requires that liable foreign firms should appoint an accredited auditing office to prepare the firm's annual financial report, which shows among other things the firm's net profits for each tax year. Income tax rates rise from 5 percent to a maximum of 35 percent of net profits, depending on amount of profit. Taxes are imposed progressively on bands of income, as shown in Table 1

Table 1: Corporate Income Tax Structure In Qatar
(All Values In Qatari Riyals)
US $ 1.00 = QR 3.639
Amount - From	Amount - To	Rate
0	100,000	Exempt
100,001	500,000	10 %
500,001	1,000,000	15 %
1,000,001	1,500,000	20 %
1,500,001	2,500,000	25 %
2,500,001	5,000,000	30 %
5,000,001	upward	35 %

Qatar's corporate income tax law is applicable to foreign firms, as well as foreign equity participation in Qatari business concerns. While it is not customary for foreign equity participation in a Qatari business concern to be in any way exempted from the corporate income tax provisions, foreign firms operating in Qatar may receive tax holidays or other exemptions. It may be advisiable for a foreign firm to approach the Ministry of Finance in advance.

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